Fraud Prevention in the Public Sector: The Role of Internal Audit

Taufiq Supriadi, Kurniawan Tjakrawala, Nyoman Adhi Suryadnyana, Juska Meidy Enyke Sjam and Rochman Marota

Economic Studies journal, 2025, issue 3, 170-183

Abstract: Fraud can severely damage public institutions' finances and reputation, making identifying factors that reduce fraud risk critical. This research aims to analyze and evaluate the effectiveness of internal audits in preventing fraud in the public sector, employing a qualitative approach with descriptive methods. The study identifies several factors contributing to fraud in the public sector, including financial pressure, a desire for a certain lifestyle, gambling problems, family pressure, dissatisfaction with the organization, and arrogance. These factors often create incentives for individuals to engage in fraudulent behaviour. Effective fraud risk management relies heavily on implementing adequate internal controls, strict monitoring, and fostering an organizational culture that upholds integrity. Internal auditors play a pivotal role in this process by identifying potential risks, assessing the effectiveness of internal controls, and promoting a transparent work environment. Additionally, they are instrumental in addressing the root causes of fraud by cultivating a culture that values honesty, implementing effective monitoring processes, and establishing a foundation of accountability and transparency in local government administration. This research underscores the critical importance of internal audits in safeguarding the integrity of public institutions and ensuring effective governance, emphasizing their role in preventing fraud and promoting a culture of accountability and transparency.

JEL-codes: D73 G32 H83 K42 M42 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:bas:econst:y:2025:i:3:p:170-183

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